16 Blockchains Can Freeze User Funds: Bybit Security Report Uncovers Centralization Concerns
A recent in-depth analysis by Bybit’s Lazarus Security Lab has revealed that 16 prominent blockchain networks possess the inherent ability to freeze user funds at the protocol level — a discovery that raises serious concerns about decentralization and user autonomy across the crypto ecosystem. Even more concerning, the report highlights that an additional 19 networks could implement similar control mechanisms with only minimal code modifications, challenging the foundational ethos of blockchain as a censorship-resistant technology.
Freezing Powers Undermine Decentralized Ideals
The investigation, which evaluated 166 blockchain protocols, concluded that several well-regarded blockchains—including BNB Chain, Sui, and Aptos—have embedded fund-freezing functions directly into their core infrastructure. These mechanisms allow foundations or validator groups to block user access to their assets without requiring private key access or wallet control — effectively overriding the premise that only users control their funds.
This capability stands in stark contrast to the decentralized narrative that has long underpinned the crypto industry. According to the researchers, these emergency control tools resemble traditional banking powers and introduce a centralized element into what are often marketed as trustless, peer-to-peer systems.
Three Types of Freezing Mechanisms Identified
Bybit’s team identified three primary strategies employed by blockchain networks to restrict user access to funds:
1. Hardcoded Blacklists: Embedded directly into the blockchain’s source code, these blacklists publicly document addresses that are barred from transacting. Networks such as BNB Chain, VeChain, Chiliz, Viction, and XDC Network utilize this method. These lists are publicly viewable, often on platforms like GitHub, and involve direct protocol-level enforcement.
2. Configuration-Based Blacklisting: This method allows validators to apply private local configurations to block specific addresses without public visibility. Sui, Aptos, Harmony, Supra, EOS, Oasis, Wax, and Waves are among the networks using this approach, giving foundations silent control over who can transact on their networks.
3. Smart Contract-Based Controls: A more transparent method, where smart contracts manage fund freezing via on-chain governance. Huobi ECO Chain is currently the only blockchain employing this technique, striking a balance between oversight and transparency.
All three approaches ultimately prevent targeted wallets from signing transactions, rendering the assets unusable until the block is lifted — a process entirely dependent on the discretion of the controlling foundation or validator group.
Real-World Use Cases: Security or Censorship?
The report cites several significant historical examples where these capabilities were deployed:
– In May 2025, Sui froze approximately $162 million following the Cetus DEX hack and subsequently redistributed the recovered funds through a governance vote that received over 90% approval.
– BNB Chain activated its hardcoded blacklist after a $570 million bridge exploit in October 2022, successfully limiting the exploiters’ ability to move the stolen funds to around $100–110 million.
– VeChain was one of the first to use such capabilities in December 2019, blacklisting 469 addresses linked to a $6.6 million hack.
– Aptos integrated freezing functionality shortly after the Sui incident, indicating how swiftly networks are willing to adopt centralized controls when security threats emerge.
While these actions arguably helped mitigate substantial losses, they also demonstrate that centralized override switches exist — often in stark contradiction to blockchain’s original promise.
Emerging Risks for Crypto Traders
For investors and traders, these revelations prompt a reevaluation of the safety and autonomy associated with holding crypto assets. The ability of a blockchain foundation to unilaterally freeze funds introduces a risk factor that is rarely disclosed or understood, especially by retail participants.
Although these freezing tools are often framed as protective measures against malicious activity, they create a slippery slope. If used improperly or under external pressure (e.g., from regulators or state actors), they could be repurposed for censorship or political suppression, undermining user trust.
Cosmos Ecosystem at Risk
The report also flags 19 additional blockchains—many within the Cosmos ecosystem—as susceptible to similar controls. Chains such as Arbitrum, Celestia, dYdX, Sei, and Kava could implement freezing mechanisms with relatively minor technical adjustments. This revelation suggests that the potential for centralization is far more widespread than previously assumed.
The Security vs. Decentralization Dilemma
David Zong, Head of Group Risk Control and Security at Bybit, commented on the findings, highlighting the growing tension within blockchain development: “Blockchain was built on the principle of decentralization—yet our research shows that many networks are developing pragmatic safety mechanisms to respond quickly to threats.”
This dichotomy—between maintaining decentralized ideals and addressing real-world security threats—has become increasingly pronounced. As the blockchain industry matures, developers and communities are being forced to make difficult trade-offs, often compromising on ideological purity in favor of practical safeguards.
Institutional Adoption and Regulatory Influence
With institutional investment in digital assets on the rise and global regulators tightening oversight, the likelihood of more blockchains integrating fund-freezing controls is increasing. These mechanisms provide a way to comply with legal requirements, reduce systemic risk, and respond rapidly to hacks or fraud. However, this shift may alienate core crypto users who seek freedom from centralized control.
The Future of Censorship Resistance
If decentralization is to remain a defining feature of blockchain technology, transparent governance models and user-inclusive decision-making processes will be essential. Rather than embedding unilateral controls, future chains may need to explore on-chain voting, time-locked restrictions, or multi-signature councils to ensure that any freezing action is both justified and accountable.
What Traders Should Do
For crypto holders and traders, the key takeaway is vigilance. Understanding the governance structure and technical capabilities of the networks they interact with is crucial. Not all blockchains are created equal, and some may be more prone to central intervention than others.
Users are encouraged to:
– Review the technical documentation of the blockchains they use.
– Diversify asset holdings across multiple protocols with differing governance models.
– Stay updated on protocol changes and governance proposals that could introduce freezing controls.
Final Thoughts
Bybit’s report shines a spotlight on a growing but under-discussed issue within the crypto space — the creeping centralization of blockchain networks through fund-freezing capabilities. While these tools can serve legitimate purposes in crisis scenarios, they also raise critical questions about user autonomy, transparency, and the future direction of decentralized finance.
As the industry evolves, the challenge will be to strike a balance between robust security and the preservation of the fundamental freedoms that made blockchain revolutionary in the first place.